A sell / hold analysis compares what an owner nets by selling a property today against what continuing to own it earns. It puts both paths on the same footing — net sale proceeds now, versus the hold period's cash flows plus a later exit — so the decision rests on arithmetic, not attachment.
Why It Matters in CRE
Every asset is a standing decision to keep capital where it is. The useful question isn't "is this a good property?" but "is this the best use of the equity trapped inside it?" The inputs that drive the answer:
- Current market value — what it would clear today, net of selling costs.
- Basis and debt — the loan balance, its rate versus today's, and any prepayment cost.
- Remaining hold economics — NOI trajectory, lease rollover, and a realistic future exit.
- Capital ahead — the roofs, systems, and TI the hold has to fund.
- Tax drag — gain tax and depreciation recapture, triggered only by a sale.
- Reinvestment rate — what redeployed equity can actually earn now.
A Worked Example
A stabilized property with a below-market loan:
- Market value today: $46.2M, with roughly $1.2M of selling costs
- Loan balance: $28.0M at a 4.35% fixed rate, three years of term left
- Net sale proceeds: about $17.0M before tax
- Hold case: a projected 12.1% five-year IRR on that $17.0M of equity — including $1.6M of near-term capex and an eventual exit
- Sell case: redeploying wins only if new deals reliably beat 12.1% after the tax bill on sale
The cheap fixed-rate loan does quiet work in the hold case — replacing it at today's rates would cut the hold IRR meaningfully. If new deals underwrite to 14%, selling looks tempting — until tax drag narrows the spread. The answer moves with rates, NOI, and exit caps: a sell / hold run six months ago is an opinion, not an analysis.
The Refinance Third Option
Sell versus hold is really sell versus hold versus refinance: a cash-out refi returns part of the equity while keeping the asset — attractive when value has outrun NOI. The catch is the debt: a refi swaps the 4.35% loan for a market-rate one, so the analysis must charge that cost against the freed equity. When the loan is the asset's best feature, holding to maturity often wins.
How Teams Handle This Today
Typically as an annual exercise — a one-off spreadsheet per asset for the portfolio review, stale within a quarter. Because rebuilding it is work, the question gets asked once a year while the market asks it monthly. With Playgrounds, you describe the comparison once and get an app that keeps the sell, hold, and refi cases current as rates, NOI, and values move.
Frequently Asked Questions
What does a sell / hold analysis compare?
The after-cost proceeds of selling today — and what that equity earns redeployed — against the cash flows and eventual exit of continuing to own. Both paths are expressed as a return on the same equity, so they compare directly.
How often should you rerun it?
Most institutional owners review each asset at least annually, but the honest answer is whenever the inputs move — a rate shift, a leasing surprise, a big capex estimate, or a strong unsolicited offer all justify a rerun.
How do taxes change the decision?
Selling triggers tax on the gain and depreciation recapture, which can consume much of the apparent spread between selling and holding. Some owners defer it through a like-kind (1031) exchange, which turns the sell decision into a trade decision.
What's the most common mistake in a sell / hold analysis?
Comparing against an unrealistic reinvestment rate. The hold case competes with what redeployed equity can earn in deals available today — not the returns of a remembered vintage. A close second: ignoring what a below-market loan is worth.
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